(Bloomberg) -- Carlyle Group Inc. Chief Executive Harvey Schwartz made progress lifting margins and earnings on fees in the third quarter, a period when shareholder profits from deal exits remained muted for the firm.
Distributable earnings totaled $367.1 million, or 95 cents a share, Washington-based Carlyle said Thursday in a statement. That beat the 89-cent average estimate of analysts surveyed by Bloomberg.
Even though distributable earnings – a closely scrutinized measure of profitability — remained little changed from the year ago period, a lower tax rate and share repurchases helped boost earnings per share by 9.2%.
Schwartz, whose firm is the smallest of the top five US publicly traded alternative asset managers, is pushing to cut fat, boost fund returns and lift the stock. He’s carrying out the makeover amid an industrywide deal slump as firms have struggled to exit investments they made when interest rates were lower.
Carlyle’s stock has climbed 33% this year, trailing its larger rivals.
There are signs that Schwartz’s efforts are trickling down to the bottom line at the firm, which ended the quarter with $447 billion of assets under management. Fee-related earnings surged 36%, and margins on those profits widened to 47% in the third quarter, an increase of 10 percentage points from a year earlier.
Carlyle’s private equity arm still made some progress on exiting investments, as realized performance revenue for the business climbed 37%.
Because Schwartz restructured compensation to tie dealmaker pay more closely to returns, that left less earnings for shareholders. Private equity distributable earnings slumped 19%.
Carlyle is betting that raising the stakes for dealmakers to deliver returns will pay off for shareholders over the long haul.
The firm’s credit business helped mitigate a decline in distributable earnings from private equity. Credit, Carlyle’s biggest business by assets, grew distributable earnings by 47%. That profit measure for the investment solutions arm, which buys and sells second-hand fund stakes, soared 150%.
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